Following the first article in our value chain series, Tim Burt explains what to expect from our raw materials analysis over coming months and looks at what signs to watch for in the copper market.

Dr. Copper, as its known to some, provides analysts with an indication into the health of the global economy while to others, specifically CPOs, it is a material that is integral to the goods they produce.

With this in mind, where the price stands and where they are expected to go next are two very important bits of information but, like all things commodity related, predictions are a tricky business simply because of all the variables that can influence the price from a miners’ strike to delivery delays.

In an effort to understand what copper producers, users and analysts thought about the copper market from prices through to potential supply issues, Procurement Leaders spoke to companies located across the copper value chain and a picture emerged that it seems, for the moment at least, is starting to come true.

John Mothersole, nonferrous metals analyst at IHS, told Procurement Leaders that, "Over the past five years the market has been sluggish in terms of production growth. That seems to be changing. We are now seeing new medium-sized facilities opening, brown-field expansions and resolution of supply chain bottlenecks which promises to boost output."

If we do see an increase in mine production and indeed a surplus, we would expect prices to head lower, which is good news for industrial users of copper."

This was a view that was echoed further up the value chain.

"It currently looks like we are through some of the big teething problems associated with new supply coming online," was how one procurement chief described from the transformation stage of the copper chain described how he saw supply over the coming months, while BHP Billiton said in a recent production report that total production from its Escondida mine in Chile is on track to increase by 20% in the 2013 financial year.

Most people were fairly confident about where prices would go on the back of this.

"We don’t believe prices will increase sharply in the coming months," said one buyer from the consumer goods industry, while IHS’s Mothersole said, "If we do see an increase in mine production and indeed a surplus, we would expect prices to head lower, which is good news for industrial users of copper."

Now it seems that these expectations, made in February, are coming true.

According to a Financial Times report, miners, traders and hedge fund managers a Cesco week in Chile expected the copper market to be in surplus for the next few years with some expecting prices to be forced down to $6,000 a tonne. As of April 5 copper prices on the London Metal Exchange (LME) stood at $7375.5 per tonne.

What does this show? Copper’s future looks to feature strong supply and, for buyers at least, some certainty is returning after the volatility that characterised the market

Members can access the full value chain analysis here. The next Procurement Leaders value chain analysis will cover cotton and steel.

Tim Burt is premium content writer for Procurement Leaders. To subscribe to the magazine, click here.